WTI Crude Oil Closes Back Below $80/Barrell

Good afternoon!

I am writing my update a bit earlier due to conflicts tomorrow.  This week was very interesting.  “Risk off” took over the news wires as recessionary signs flashed all over the markets.  More attrition at large tech firms were announced.  The dollar gained back strength.  Bitcoin fell back below the $30k level.  Credit card debt continued to sky rocket to another record level.  The “repo man” took the most cars back last month since 2008.  Housing market purchasing slowed.  Fears of summer demand for gasoline are starting to take hold.  And most market makers are now pricing in a FED interest rate hike in May.  Now, that’s just American economic data!  On the world stage, refiners are expanding at incredible rates causing crack spreads to crumble in America and across the globe.  China and India continue to purchase Russian crude above the “cap” set by many countries.  So oil is flowing across the globe and refiners are moving forward at a quick clip, even though world recession could be on the horizon.  Even OPEC+’s large surprise cut is not really affecting the pricing that much because refiners around the world continuing to expand and run at high rates.  It’s amazing how much can change in one week.  Last week was “no recession in sight, and WTI oil is going to blow out towards $90/barrel.”  Now this week is “recession signals are everywhere and the FED is going to raise rates again.  Run for the hills!”  Even though I believe WTI crude oil will close below $80/barrel this week, I do not believe OPEC+ will let WTI crude oil price fall back below $70/barrel.  We would need another “black swan” event like the banking crises to experience WTI prices collapse that hard.  But for now, I would say the “risk off” is winning and cheaper prices are coming down the pipeline….for now. 🙂

In local markets, Chicago spot market never blew out in price to match The Group in spot diesel pricing.  In fact, as fast as The Group spot price rallied, the price collapsed this week.  Overall, cost of gasoline and diesel are going to end the week lower and I expect to see some falling retail prices next week at the pump.  However, with this high volatility, the drops can take some time as blended inventories work there way into the market.

Propane is sending a message loud and clear.  A price floor seems to be forming.  In other words, with how much WTI crude oil price fell this week, propane prices did not fall according to historicals.  I’m starting to see a floor for possibly summer and next year take shape.  Basically what the situation means is that propane producers have a certain price they need to make in order to keep operations running.  The cost of labor, materials, etc. continue to rise and I believe with the arbitrage to export, producers/suppliers are kind of saying “we wont make/sell for less than this certain price because it doesn’t make economic sense.”  Now, the good news is that I do believe that spot price in the summer will drop a little bit more, and I do believe that next heating season’s contracts will be lower than last year.  More to come as the volatility in the WTI crude trade continues.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.

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